NEW YORK — Greater efficiency allowed Coldwater Creek Inc. to convert modest sales growth into major bottom-line gains in the third quarter.
For the three months ended Nov. 2, the Sandpoint, Idaho-based multichannel retailer more than tripled its net income, boasting a 262.7 percent increase in profits to $5.7 million, or 54 cents a diluted share. That compares with last year when the firm recorded earnings of $1.6 million, or 15 cents. Earnings per share shattered the Wall Street estimate by 39 cents.
Sales for the period rose 8.5 percent to $153.8 million from the same period a year ago.
"Our strong performance for the fall season was the result of putting the right merchandise in front of the customer at the right time," chief executive officer Dennis Pence said in a statement. "In particular, our new retail model, which puts the focus on our best-selling items, was well received. For the holidays, our stores feature a more traditional Christmas experience, with festive products and decor that reflect the season and resonate with shoppers."
Chief merchandising officer Georgia Shonk-Simmons noted in the statement that the company’s best categories for fall and the holidays have been novelty jackets and sweaters, and said customers have had a favorable reaction to Coldwater’s brighter color palette.
More important to the better bottom line were cost cuts in selling, general and administrative expenses, which decreased by $4 million, or 590 basis points, year-over-year. In the most recent quarter, SG&A accrued to $54 million or 36.4 percent of net sales, compared with last year when it came to $60 million or 42.3 percent of sales. The lower SG&A costs were mostly the result of mailing 19.8 percent fewer catalogs during the quarter.
By channel, net sales from the direct segment, which encompasses the company’s catalog, e-commerce and outlet stores, dipped 2.2 percent to $120.6 million. Sales from this segment accounted for 78.4 percent of Coldwater’s total net sales versus 87.1 percent last year.
In the e-commerce business, sales grew 10.9 percent to $50 million. E-commerce sales represented 32.5 percent of total net sales, compared with 31.8 percent in the prior-year period.Retail sales were the biggest winner, gaining 81 percent to $33.2 million from $18.3 million a year ago. The retail segment chipped in 21.6 percent of total net sales versus just 12.9 percent last year.
The net sales increase coupled with the cost cuts allowed a healthy gross profit gain to $65.4 million or 42.5 percent of sales from $62.5 million or 44.1 percent a year ago. While gross profits grew primarily because of the sales increase, the gross margin decline of 160 basis points was a result principally of increased store occupancy costs from the company’s retail expansion, partially offset by better-than-expected catalog sales returns and improvement in merchandise margins.
For the first nine months of the year, Coldwater Creek reported net income jumped 85.5 percent to $7.8 million, or 73 cents, versus $4.3 million, or 39 cents, in the year-ago period. Net sales climbed 3.2 percent to $358.6 million.
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